Agilysys, Inc.

Good day and thank you for standing by. The call will start at 431. Again, thank you for standing by. The call will start at 431. Good day, ladies and gentlemen, and welcome to the AGILISIS 2027 first quarter conference call. As a reminder, today's conference may be recorded. I would now like to turn the conference over to Jessica Hennessy, Vice President of Operations and Investor Relations of AGILISIS. You may begin.

Thank you, Lisa, and good afternoon, everybody. Thank you for joining the AGILISIS 2027 first quarter conference call. We will get started in just a minute with management's comments, but before doing so, let me read the safe harbor language. Some statements made on today's call will be predicted and are intended to be made as forward-looking within the safe harbor protections of the U.S. Private Securities Litigation Reform Act of 1995, including statements regarding our financial guidance. Although the company believes that its forward-looking statements are based on reasonable assumptions Such statements are subject to risks and uncertainties that could cause results to differ materially. Important factors that could cause actual results to vary materially from these forward-looking statements include our ability to achieve the increased guidance levels, continue to improve profitability levels, the company's ability to maintain sales momentum, utilize AI to continue to increase competitive advantages, and the risks set forth in the company's reports on Forms 10-K and 10-Q and other reports filed with the Securities and Exchange Commission. As a reminder, any references to record financial and business levels during this call refer only to the time period after Agilisys made the transformation to an entirely hospitality-focused software solutions company in fiscal year 2014. With that, I'd now like to turn the call over to Mr. Ramesh Srinivasan, President and CEO of Agilisys. Ramesh, please go ahead.

Thank you, Jess. Good evening. Welcome to our fiscal 2027 first quarter earnings call. Joining Jess and me on the call today is Dave Wood, CFO at our Alpharetta Atlanta headquarters. Let me cover sales and selling success first before discussing revenue, profitability, the decision to raise guidance levels provided a couple of months ago, and other details. We continue to measure sales in annual contract value terms and exclude subscription sales pertaining to the Marriott Property Management System project from the overall sales numbers. FY27 Q1 was an excellent overall business quarter for Agilisys, including with respect to sales, revenue and profitability, each of which set a new Q1 quarter record. This was the best sales success April to June Q1 period on record. In fact, it was the best sales quarter in our history outside of the Q4 January to March sales period, which has tended to be the strongest during the recent several years. The last two quarters taken together constituted the best-ever six-month sales period in our history. Fiscal Q1 April to June was an excellent sales quarter for several verticals. This was the best sales quarter ever for the Asia-Pacific region and the highest Q1 sales period for each major domestic vertical, casino gaming, hotel, resorts, cruise ships, HRC, and food service management, FSS. Sales success this quarter featured three major seven-figure multi-product ecosystem wins, two in the casino gaming vertical and one in Australia, and all three were won battling against our main, most often seen competitor. A major casino resort currently under construction in the Las Vegas Strip chose Agilisys for point-of-sale POS, Property Management System, PMS, and several other software modules. Another major casino resort based in Arizona, who had been the customer of our main competitor for about two decades, chose to switch to Agilis' lock, stock, and barrel across POS, PMS, and other software modules. Despite these two big wins in the U.S., The main highlight of the quarter probably was a nine property resort group in Australia deciding to switch to Agilis's PMS and other related supporting modules after being with our main competitor for more than a couple of decades. We were originally not included in this particular RFP process. It took a good reference recommendation from one of our current customers in Australia along with dedicated, persistent efforts by the sales team to get included in the game at the last minute. And from that point forward, we surged forward quickly thanks to the superiority of our best-in-class software modules and the obvious strengths of the end-to-end ecosystem, along with excellent product demonstrations and presentations conducted by our talented personnel in the Asia-Pacific region. and finalization of the customer selection process was completed in just a few weeks after that. Our sales win-loss ratio remains high and impressive. Getting more at-bats remains our main challenge, and we are getting better at being more persistent and getting included in more selection processes, backed up by a growing number of positive reference customers for the modernized solutions. A couple of significant customers, including one in the UK, recently reported achieving excellent revenue improvements directly attributable to the use of the Agilis' ecosystem of modern, interconnected solutions, especially the ability for their guests to book packages online, a recent award-winning innovation which would be virtually impossible for our competition to duplicate anytime soon. We expect our sales level to continue running forward with increased momentum as such differentiating value creation success for customers become more well-known. Given the nature of our B2B business, even one such story that a customer is willing to talk about openly is worth a million in marketing spend. While this was another excellent business quarter in various ways, I would be remiss if I don't remind everyone that it is always best to judge our business progress on an annual basis. There is no guarantee that each upcoming quarter will be a record. We can, however, state with a high degree of confidence that fiscal 2027 will be a record best year for sales, revenue, and profitability. This is a business that should be judged on annual results and full year guidance levels. With respect to sales deals won during Q1 fiscal 2027, April to June, we added 15 new customers, excluding Book for Time, all of whom signed subscription license-based sales agreements. These 15 new customers licensed an average of close to six products each. We also added 87 new properties which were not using any of our software solutions before, but the parent company was already a customer. Of the 102 new properties added during the quarter across new and current customers, 101 were either partially or fully subscription license based. In addition, there were 106 instances of selling software solutions to properties which are already using at least one of our other products. These 106 deals involve the sale of a total of 206 products. Additional product adoption by existing customers continues to be a big contributor to sales and revenue growth. The Marriott TMS project continues to make good progress and remains on plan. It is remarkable to watch and learn from the success we have seen with this huge Technology Transformation Project, one of the biggest ever attempted in the hospitality industry. We are proud to be associated with it and to be playing a leading role in it. Our AI adoption strategy is making good progress and is being executed as planned. We have been intentional and deliberate about first establishing the necessary cost controls Customer Data Protection and Operations Discipline Guidelines and Guardrails, thereby creating a foundation that will allow us to continue accelerating AI adoption with confidence. At the INSPIRE Customer User Conference during April earlier this year, we had announced the development of 30 plus AI-based features, that is three zero, 30 plus AI-based features. Several of these features are in the process of being deployed at pilot customer properties, while the remaining are nearing development and testing completion, as scheduled and on plan. Many of these features require not just AI, but an integrated ecosystem of modern software solutions. Modules like PMS, POS, SPA, GOLF, inventory, all communicating with each other real-time or close to real-time. That is a strength very few competing providers can offer. We are seeing a need for AI for property-wide features, not just within point solutions. To enable such AI features at scale, we have built a central orchestration layer for all AI processing. This layer routes requests to the appropriate LLM for making intelligent decisions, optimizes token usage and ensures adherence to our AI governance principles around security, privacy, compliance, and responsible AI norms. As we continue to scale up, we expect this central orchestration layer to provide the necessary controls around internal cost management, customer value creation, and managing monetization levers. Development of a couple of fully AI-native modules, CRS and revenue intelligence, is progressing on plan. We expect initial beta implementations at customer sites later this fiscal year. The initial versions of both these modules are designed to work within the scope of our product ecosystem. Now, with respect to revenue and profitability, Q1 fiscal 2027 overall revenue was $87.7 million, a record for the 18th, that is one eighth, for the 18th consecutive quarter, and 14.3%, that is one fourth, 14.3% higher than the comparable prior year quarter, driven by 26.1% year-over-year growth in subscription revenue and 8.3% growth in professional services revenue. This was the 19th consecutive quarter of more than 23% year-over-year subscription revenue growth. Growing subscription revenue at such a good clip consistently for about five years has been quite an accomplishment. Overall recurring revenue was a record $57.7 million. 18.8% higher than the comparable prior year period and 65.9% of total revenue. Q1 fiscal 2027 subscription revenue was a record $40.2 million and 69.7% of total recurring revenue. The 26.1% year-over-year growth in subscription revenue was driven by 39.7% growth in PMS and PMS-related modules and 18.5% in POS and POS-related modules. Q1 fiscal 2027 is the first quarter in our history when total subscription revenue pertaining to PMS products were higher than that of the POS ecosystem. We expect subscription revenue growth in POS and related modules to remain in the high teens, low 20s kind of percentage levels for the foreseeable future. Add-on modules across both PMS and POS constituted 36% of total subscription revenue. Q1 fiscal 2027 annual maintenance related recurring revenue was $17.4 million, very close to record high levels. Most of the subscription revenue growth is coming from new and additional projects and not based on cannibalization of annual maintenance. We continue to allow customers to make their own decisions regarding timing of moving to the club. One-time product revenue consisting of perpetual software licenses and third-party hardware was $10.3 million, in line with our expectations. Hardware revenue remains at these levels despite excellent success in overall POS sales. In fact, the last two quarters have been two of the top three on record for overall POS sales. And the recent six-month period of POS sales has been the highest-ever six-month period. Despite such POS sales results, hardware revenue remains at current levels. The current versions of the modernized POS solutions continue to carry a reduced hardware attach rate, since they also work on consumer-grade iPads and other smaller, less capital-intensive handheld devices. We continue to expect one-time product revenue to stay around this general range for the remainder of the fiscal year. Q1 fiscal 2027 professional services revenue was a record 19.6 million one nine despite a big drop off in customer paid product development related services revenue as those major projects are now past the coding phase and in the implementation stage. In addition, our services implement efficiencies have improved significantly Due to the modernized solutions becoming exponentially easier to implement and through greater use of AI tools, which is a very good thing for us, we are now selling more software for every dollar of services sold, which is another good leading indicator of a maturing modern technology based enterprise software business unit that is becoming more competitive even in price sensitive markets. We expect professional services revenue to remain around current levels during the rest of this fiscal year and continue to grow in the medium and long term as the overall business continues to expand. Despite excellent improvements in project implementation levels during the quarter and record implementation services revenue, strong sales success drove combined product services and recurring revenue backlog to record levels giving us good ongoing revenue visibility. We continue to exclude the large, ongoing large PMS rollout from backlog calculations. Q1 fiscal 2027 profitability was above our expectations going into the quarter and fiscal year. Gross margin of 55.7 million is a record for any quarter in absolute dollar terms. and adjusted EBITDA of 20.8% of revenue made this quarter the most profitable Q1, April to June period in history. Given the better than expected start to the fiscal year, we are raising revenue guidance levels for fiscal 2027. We now expect full fiscal year revenue to be in the range of 368 and many more. We are also raising the guidance level for full-year subscription revenue growth to be at least 32% compared to the prior minimum 30% expectation. Given the good profitability start to the year, we have increased confidence that full-year profitability adjusted EBITDA by revenue, even after accounting for any potential additional strategic investment needs that might emerge during the rest of the fiscal year, will work out to be 24% in line with the guidance provided earlier. We continue to expect the adjusted EBITDA by revenue F527 exit rate during Q4 to be close to the 30% mark. With that, let me hand over the call to Dave for further color on financial and other operational execution details.